Integrated Annual Report 2023
SECTION 1 - PRESS METAL AT A GLANCE 2 About This Report 4 Who We Are 5 Our Integrated Value Chain 6 Our Key Strengths 8 Key Highlights in 2023 10 Awards and Accolades 11 Associations and Memberships SECTION 2 - MESSAGES FROM OUR LEADERS 12 Chairman’s Statement 16 Management Discussion and Analysis by Group CEO SECTION 3 - CHARTING THE PATHWAY TOWARDS EXCELLENCE 22 The Market We Operate in 26 Engaging with Our Stakeholders 29 Material Matters at Our Core 31 Managing Our Risks and Opportunities Effectively 35 Fuelling Growth through Our Strategic Priority Areas 38 Our Value Creation Model SECTION 4 - EFFECTIVE STEWARDSHIP THROUGH GOOD GOVERNANCE 40 Corporate Information 42 Profile of Our Board of Directors 48 Profile of Our Key Senior Management, Key Operating Management and Country Heads 51 Corporate Governance Overview Statement 74 Director’s Responsibility Statement 75 Additional Compliance Information 76 Audit Committee Report 82 Statement on Risk Management and Internal Control SECTION 5 - DELIVERING SUSTAINABLE VALUE FOR OUR STAKEHOLDERS 87 About This Sustainability Report 88 Overview of Our Sustainability Approach 89 Key ESG Highlights 2023 90 Message from Group CEO 92 Sustainability Aspiration 94 Our Approach to Sustainability 96 Sustainability Achievements 98 Sustainability Targets and Performance 99 Upholding Good Governance and Economic Resilience 121 Caring for the Planet 148 Empowering Our People and Enriching Our Communities 187 Independent Limited Assurance Report 191 GRI Content Index 198 TCFD Content Index 202 SASB Content Index 203 Bursa Malaysia Three-Year Sustainability Performance Data SECTION 6 - FINANCIAL STATEMENTS 207 Financial Statements SECTION 7 - ADDITIONAL INFORMATION 311 List of Properties 312 Analysis of Shareholdings 316 Notice of Annual General Meeting 324 Statement Accompanying Notice of Annual General Meeting 325 Glossary • Proxy Form FORTIFYING OUR POSITION Our commitment to fortifying ourselves as a sustainable integrated aluminium producer in Southeast Asia remains resolute. This inaugural Integrated Annual Report illustrates a year marked by resilience, operational efficiency and steadfast dedication to shaping a future where Press Metal not only endures but thrives amidst dynamic challenges. We invite you to witness our journey of fortification, where a harmonious blend of strength and resourcefulness shapes a lasting legacy within the industry. INSIDE THIS REPORT
Press Metal at a Glance Press Metal at a Glance Press Metal Aluminium Holdings Berhad 2 3 Integrated Annual Report 2023 ABOUT THIS REPORT About This Report SCOPE AND BOUNDARIES This IAR 2023 covers the financial year from 1 January to 31 December 2023 (“FYE2023”), unless otherwise stated, encompassing disclosures of the Group’s activities, including subsidiaries, joint operations, joint ventures and associates, where relevant. In demonstrating our commitment to creating value for stakeholders over the short, medium and long term, we adopt an integrated and comprehensive reporting approach that takes into account: • Business Performance: Providing a holistic commentary on our financial and non-financial performance as well as insights into our future prospects (See pages 12-19 for more) • Stakeholder Engagement: Building engaging relationships with various stakeholders and integrating their expectations into our business strategies (See pages 26-28 for more) • Materiality: Prioritising key matters with the potential to influence our performance, based on global trends, industry developments and significant risks to our business (See pages 29-30 for more) • Key Capitals: Identifying and detailing inputs and outputs for each capital in our business model, and illustrating how they collectively generate value for our business ecosystem (See pages 38-39 for more) MATERIALITY Full disclosures regarding the assessment and determination of our material topics can be found in the Material Matters at Our Core section of IAR 2023. Our methodology for identifying material topics is outlined on page 29 of this IAR 2023. Essentially, we assess materiality based on the following criteria: • Topics that are crucial to financial value creation; and • Topics that are material to our stakeholders and contribute to indirect value creation REPORTING PHILOSOPHY AND FRAMEWORK This IAR 2023 stands as our primary report communicated to our stakeholders. We have prepared the report in accordance with the following frameworks, standards and guidelines: IAR 2023 • VRF’s <IR> Framework • Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) • Companies Act 2016 • Malaysian Code on Corporate Governance 2021 (“MCCG 2021”) • Corporate Governance Guide (4th Edition) of Bursa Malaysia Sustainability Report 2023 (“SR 2023”) • MMLR of Bursa Malaysia • Bursa Malaysia’s Sustainability Reporting Guide (3rd edition) • Global Reporting Initiative (“GRI”) Universal Standards 2021 • United Nations’ Sustainable Development Goals (“UN SDGs”) • FTSE4Good Bursa Malaysia Index’s Environmental, Social and Governance (“ESG”) Indicators • Task Force on Climate-related Financial Disclosures (“TCFD”) • United Nations Global Compact’s (“UNGC”) Ten Principles • Sustainability Accounting Standards Board (“SASB”) Sector-Specific Disclosures • Aluminium Stewardship Initiative (“ASI”) Performance Standard Version V3 (“ASI PS v3”) Corporate Governance Report 2023 (“CG Report 2023”) • MCCG 2021 • MMLR of Bursa Malaysia • Companies Act 2016 Financial Statements for FYE2023 • MMLR of Bursa Malaysia • Companies Act 2016 • International Financial Reporting Standards (“IFRS”) • Malaysian Financial Reporting Standards (“MFRS”) FORWARD-LOOKING STATEMENTS This IAR 2023 contains forward-looking statements concerning the Group’s financial position, future prospects, targets and business strategies. Although these statements and forecasts are grounded in reasonable and current assumptions and circumstances, they do not serve as guarantees for future results; actual outcomes may differ due to various events, risks, uncertainties and other factors. Therefore, our readers are advised not to place undue reliance on these forward-looking statements. ASSURANCE The financial disclosures and reports presented in the Financial Statements section of this report have undergone independent auditing by KPMG PLT. To uphold the consistent accuracy and reliability of our report, we have enlisted an independent third party, Grant Thornton Malaysia PLT, to provide external assurance on our SR 2023. This limited assurance specifically pertains to selected sustainability performance data and data collection processes related to environmental management and occupational health and safety, which includes the following five (5) indicators: 1. Greenhouse Gas (“GHG”) emissions (Scope 1 and 2) 2. GHG emissions intensity (Scope 1 and 2) 3. Total energy consumption 4. Number of work-related fatalities 5. Lost-Time Injury Frequency Rate (“LTIFR”) BOARD RESPONSIBILITY STATEMENT The Board of Directors (“Board”) of PMAH acknowledges its responsibility in ensuring the integrity and credibility of this IAR 2023. This IAR 2023 has been prepared in line with good governance practices and is guided by the VRF’s <IR> Framework. In the Board’s assessment, the IAR 2023 adequately addresses materials that matter to the Group’s performance and its ability to create value. This IAR 2023 has been approved by the Board. NAVIGATION ICONS Our 6 Capitals Financial Capital FC Intellectual Capital IC Natural Capital NC Manufactured Capital MC Human Capital HC Social and Relationship Capital SRC Our Material Matters Sustainability Theme 1: Upholding Good Governance and Economic Resilience M1 Economic Performance M2 Business Ethics and Corporate Governance M3 Regulatory Compliance M4 Responsible Sourcing M5 Product Quality and Customer Satisfaction M6 Sustainable Manufacturing M7 Risk Management M8 Customer Data Privacy & Information Technology Sustainability Theme 2: Caring for the Planet M9 Climate Change M10 Waste M11 Material Stewardship M12 Water and Effluents M13 Biodiversity Sustainability Theme 3: Empowering Our People and Enriching Our Communities M16 Diversity and Inclusivity M14 Occupational Health and Safety M17 Talent and Labour Management M15 Human Rights M18 Community Management We are pleased to present the inaugural Integrated Annual Report 2023 (“IAR 2023”) of Press Metal Aluminium Holdings Berhad (“PMAH” or the “Company”) and its subsidiaries (collectively referred to as “Press Metal” or the “Group”), marking the beginning of our integrated reporting (“<IR>”) journey. The IAR 2023 provides a comprehensive overview of our financial and non-financial performance, integrating our operational performance, strategic priorities, current environmental risks and challenges, governance practices and future prospects. It is aligned with the Guiding Principles and Content Elements of the <IR> Framework under the Value Reporting Foundation (“VRF”), ensuring transparency and accountability in our reporting practices. Through this IAR 2023, we diligently communicate our efforts to embed sustainability and enhance business resilience, aiming to create sustained value to our stakeholders. Our Stakeholders Local Communities Media/ Analysts Key Senior Management Suppliers/ Contractors/ Service Providers/ Consultants Customers/ Distributors Business Partners Employees Capital Providers (Financiers, Shareholders, Investors) Government/ Regulatory Authorities REPORTING SUITE Scan the QR code or visit our website at www.pressmetal.com to read our IAR 2023. FEEDBACK AND CONTACT POINT We are committed to continuously improving the quality of our reporting. We highly value and welcome your feedback and input to enhance our reporting journey. If you would like to submit feedback about this report or request further clarification, please email: corpcomm@pressmetal.com.
Press Metal at a Glance Press Metal at a Glance Press Metal Aluminium Holdings Berhad 4 5 Integrated Annual Report 2023 WHO WE ARE OUR STORY With a journey spanning over three (3) decades of growth and expansion, Press Metal has evolved from a local aluminium extrusion company into a globally integrated aluminium producer – serving many of the world’s biggest companies and providing the aluminium used in various industries including infrastructure, transportation, construction and consumer sectors. Listed on the Main Market of Bursa Malaysia, PMAH is a constituent of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (“KLCI”). PMAH, since FYE2022, earned a place in the FTSE4Good Bursa Malaysia Index, giving recognition to our commendable sustainability practices and disclosures. Our principal business activities include the manufacturing and trading of primary, value-added and extruded aluminium products. With our corporate headquarters in Selangor and operations extending to Sarawak, Malaysia and Guangdong, China, we are the largest aluminium producer in Southeast Asia (“SEA”). Our global presence is strengthened by distribution offices in Australia, the United Kingdom (“UK”) and the United States of America (“US”), which cater to the needs of their respective local and regional markets. OUR MISSION Establish partnerships and deliver incremental value to stakeholders Business B Mindfully consume and source natural resources to deliver our aluminium products Environment E Enable an inclusive workplace and protect the social welfare of our people Talent T Enrich the communities we operate in Society S OUR VISION To provide products and solutions for a sustainable future OUR CORPORATE VALUES The ability to enable strategic decision-making that supports value creation for both the Group and its stakeholders Business Acumen To drive business growth with a global perspective and to progressively expand into a top industry player Global Outlook Upholding our role as a good corporate citizen by continually contributing to the development of a better industry, community and world Social Responsibilities A constant focus to attain, retain and improve the quality of products based on industry benchmarks and clients’ requirements Quality Excellence Harnessing the collective capabilities and skill sets of our people towards realising company goals and objectives Focused Teamwork OUR INTEGRATED VALUE CHAIN UPSTREAM* Bauxite Mining & Alumina Refining • PT Bintan Alumina Indonesia • Worsley Alumina Unincorporated Joint Venture Carbon Anode Manufacturing • Shandong Sunstone & PMB Carbon Ltd., Co DOWNSTREAM • PMB Aluminium Sdn. Bhd. • Press Metal International Limited • Press Metal International Technology Ltd. TRADING AND DISTRIBUTION • Press Metal UK Limited • Press Metal Aluminium (Aus) Pty. Ltd. • Press Metal North America Inc. • PMB Aluminium Sabah Sdn. Bhd. Aluminium - Metal of the future Integrated Aluminium Production • PMB Central Sdn. Bhd. • PMB Eastern Sdn. Bhd. • PMB Northern Sdn. Bhd. Smelting Capacity 1.08 million MT Extrusion Capacity 230k MT * joint investments Infrastructure Transportation Electronics Packaging MIDSTREAM Smelting • Press Metal Bintulu Sdn. Bhd. • Press Metal Sarawak Sdn. Bhd. Casting • Press Metal Aluminium Rods Sdn. Bhd.
Press Metal at a Glance Press Metal at a Glance Press Metal Aluminium Holdings Berhad 6 7 Integrated Annual Report 2023 OUR KEY STRENGTHS Our Key Strengths • We stand as the leading integrated aluminium producer in SEA, with a midstream smelting capacity of 1.08 million tonnes per annum and our downstream extrusion segment possessing a production capacity of 230,000 tonnes per annum. • Venturing vertically upstream, we have strategically invested in two (2) alumina refineries – PT Bintan Alumina Indonesia (“PT Bintan”) in Indonesia, and Worsley Alumina Unincorporated Joint Venture (“Worsley UJV”) in Australia [via Japan Alumina Associates Pty. Ltd (“JAA”)] – investments that secure a significant portion of our alumina requirements. The proximity of these refineries to our smelters enhances logistics and cost efficiencies. • Our investment in Shandong Sunstone & PMB Carbon Ltd, Co in China, ensures reliable supply of up to 40% of our carbon anode requirements. • As the largest integrated aluminium producer in SEA, our substantial growth has allowed us to serve a diverse customer base not only in the region but across Europe, USA, Asia-Pacific (“APAC”) and Oceania, underscoring our capabilities to meet the varied demands of global markets. INTEGRATED ALUMINIUM OPERATIONS Smelting Capacity 1.08 million MT • Our smelting facilities meet the GHG emissions intensity benchmark set by the Aluminium Stewardship Initiative (“ASI”), maintaining our levels well below the threshold of 11 tonnes CO2e per tonnes of aluminium produced. • In recognition of our dedication to sustainable aluminium manufacturing, our smelting facilities in Sarawak, Press Metal Bintulu Sdn. Bhd. (“PMBtu”) and Press Metal Sarawak Sdn. Bhd. (“PMS”), and our extrusion facility in China, Press Metal International Limited (“PMI”), have received the Performance Standard certifications from ASI. • As a low-carbon aluminium producer, we position ourselves as the preferred supplier, gaining a competitive edge in trending industries that are actively seeking sustainable materials for their products. These include global mega sectors such as automotive, renewable energy and construction. RESPONSIBLE ALUMINIUM PRODUCTION • Sustainability is a core component of the Group’s strategy, and we take pride in our inclusion as a constituent of the FTSE4Good Bursa Malaysia Index, making our debut in June 2022 with a 4-star rating. • We have established a Sustainability Roadmap, set time-bound and measurable targets, and established action plans to advance initiatives in GHG emissions reduction, improved resource efficiency and ecosystem monitoring. • Press Metal engages with associations promoting the sustainability agenda, including ASI, UNGC, the Federation of Malaysian Manufacturers (“FMM”) and the British Malaysian Chamber of Commerce (“BMCC”). These collaborations foster knowledge exchange and shared experiences, driving positive change across the aluminium industry. SUSTAINABILITY-DRIVEN APPROACH • Our smelting plants are located in Sarawak, Malaysia, which benefits from consistent rainfall and abundant rivers. This favourable environment for harnessing stable hydropower supply has enabled our smelting operations to derive a significant portion of electricity from hydro sources. • Our smelting plants benefit from a renewable and reliable electricity supply, secured through longterm power purchase agreements with the Sarawak State’s power company. • Unlike many other smelters that are tied to floatingrate power purchase agreements that vary in accordance with market prices for coal or gas, we are not subject to fluctuations in our energy costs. RENEWABLE & RELIABLE POWER SOURCE Performance Standard certification Inclusion as a constituent of the FTSE4Good Bursa Malaysia Index 4-star rating since our debut in June 2022 from ASI for our smelting facilities in Sarawak and extrusion facility in China Extrusion Capacity 230k MT Received electricity from hydro sources Our smelting operations derive a significant portion of
Press Metal at a Glance Press Metal at a Glance Press Metal Aluminium Holdings Berhad 8 9 Integrated Annual Report 2023 KEY HIGHLIGHTS IN 2023 RM13,805 million Revenue Key Highlights in 2023 14.75 sen Earnings per Share Total Equity RM8,396 million RM577 million Dividends MSCI ESG Rating 2023 Rating: FTSE4Good Bursa Malaysia Index Press Metal Aluminium Holdings Berhad Top 25% by ESG Ratings amongst PLCs in FBM EMAS 2023 Rating: RM1,215 million PATAMI Press Metal Aluminium Holdings Berhad Gearing Ratio 0.4 times
Press Metal at a Glance Press Metal at a Glance Press Metal Aluminium Holdings Berhad 10 11 Integrated Annual Report 2023 AWARDS AND ACCOLADES Global ESG Monitor PRESS METAL ALUMINIUM HOLDINGS BERHAD PRESS METAL BINTULU SDN. BHD. World Green & Sustainability Summit 2023 - World Sustainability Leadership Award PRESS METAL INTERNATIONAL LIMITED Guangdong’s Manufacturing Top 500 We participate in both domestic and international industry associations to gain access to industry practices and stay abreast of emerging trends and developments. Remaining well-informed about the evolving industry allows us to measure our performance against peers and industry benchmarks. This, in turn, empowers us to formulate relevant and resilient strategies to seize opportunities and address challenges within the aluminium industry, including those associated with climate change and human rights. Our involvement in industry associations aligns with the principles articulated in our Industry Association Participation Principles. For more details on these principles, please visit our website at https://www.pressmetal.com/investor-relations/ corporate-governance.php. Outlined below are international associations in which Press Metal holds membership or actively participates: United Nations Global Compact A voluntary initiative launched by the United Nations to encourage global businesses and organisations to adopt sustainable and socially responsible policies. It provides a framework for companies to align their strategies and operations with ten principles, covering human rights, labour, environment and anti-corruption. By joining the UNGC, we commit ourselves to implementing these principles and submitting an annual Communication on Progress update. British Malaysian Chamber of Commerce A prominent networking chamber in Malaysia that offers business networking opportunities, knowledge exchange and bilateral trading assistance. We have expressed our commitment to supporting BMCC's efforts to raise climate change awareness by endorsing BMCC's Climate Action Pledge. Aluminium Stewardship Initiative A multi-stakeholder initiative dedicated to maximising the positive impact of aluminium through responsible production, sourcing and stewardship. ASI addresses sustainability challenges in the aluminium value chain and promotes transparency via its ASI Performance Standard and Chain of Custody. • Alashan Society of Entrepreneurs and Ecology • China Aluminium Association • China Non-Ferrous Metals Fabrication Industry Association • Foshan Nanhai Aluminium Profile Industry Association • Foshan Listing Promotion Association • Guangdong Association of Shipbuilding Industry • Guangdong Automobile Industry Association • Guangdong Society of Naval Architecture and Marine Engineering • MAYCHAM China Greater Bay • Sanshui District Aluminum Processing Industry Association • Shanghai Aluminium Trade Association The following is a list of trade groups that we belong to or are affiliated with: • Federation of Malaysian Manufacturers - Member of the Environmental Management & Circular Economy Committee - Member of the Sustainable Development & Climate Change Committee • International Aluminium Institute • Sarawak Chamber of Commerce and Industry CHINA MALAYSIA ASSOCIATIONS AND MEMBERSHIPS Cambridge IFA 3G Awards - 3G Green Innovation Award 2023 - 3G Excellence in Sustainable Development Award 2023 - Ranked as the regional No.1 for ESG transparency The Edge ESG Awards 2023 - Industrial Products & Services Category (Gold) - Green Transition (Gold) Talentbank Graduates’ Choice Award 2023 - Champion in the Manufacturing (Metal) - Outstanding ESG Award (First Runner-Up) BMCC Business Excellence Awards 2023 The Edge Billion Ringgit Club 2023 Super Big Cap Companies: Above RM40 Billion Market Capitalisation - Highest Growth in Profit After Tax Over Three Years - Highest Return to Shareholders Over Three Years Industrial Products & Services Category - Highest Growth in Profit After Tax Over Three Years
Messages from Our Leaders Messages from Our Leaders Press Metal Aluminium Holdings Berhad 12 13 Integrated Annual Report 2023 CHAIRMAN’S STATEMENT RM13.8 billion REVENUE PATAMI RM1.2 billion MOVING AHEAD WITH RESILIENCE “We are making steady progress in Fortifying Our Position in the aluminium industry in Asia.” Chairman’s Statement DEAR VALUED STAKEHOLDERS On behalf of the Board of Directors of Press Metal Aluminium Holdings Berhad, it is my pleasure to present to you our inaugural Integrated Annual Report 2023. This IAR 2023 articulates our strategies, governance and performance during the financial year ended 31 December 2023. It highlights the strong links between our financial performance and the broader social, environmental and economic context, demonstrating how we have deployed our capital to drive value creation across the short, medium and long term. We delivered a strong financial performance in FYE2023 despite operating in a very challenging environment. This was achieved by leveraging our strong customer base, which forms the solid foundation of our efforts, expanding our product range to serve the automotive, industrial and various commercial sectors and enhancing our portfolio with valueadded ancillary products. Most importantly, the resilience of our workforce empowered us to adapt to the fast-changing environment and meet our goals while remaining true to our purpose. In addition, we expanded our extrusion capacity, enhanced our efficiency and optimised our cost structures while maintaining a sharp focus on improving our financial position, resulting in a lower gearing ratio and improved cash flow. In alignment with our commitment to our five core values – Business Acumen, Global Outlook, Focused Teamwork, Quality Excellence and Social Responsibility – these forwardthinking actions have and will continue to guide us in the allocation of capital and resources towards achieving our strategic objectives across the short, medium and long-term. Strategically, we are actively exploring renewable technologies. Notably, our partnership with Xi’an Jiaotong University through a collaborative research project aims to advance research and development initiatives in carbon capture and utilisation. Through this endeavour, we are committed to enhancing our contribution to a greener tomorrow. Indeed, we are making steady progress in Fortifying Our Position in the aluminium industry in Asia. Datuk Yvonne Chia Independent Non-Executive Chairman OUR FIVE CORE VALUES CONTINUING MACROECONOMIC UNCERTAINTY The global economic landscape in 2023 remained challenging, with headwinds stemming from a high-interest environment, escalating geopolitical conflicts from Ukraine to the Middle East and China’s slower than expected recovery. With these accelerating risks compounded by rapid technological change and the urgency of the net zero agenda, the Board and Management must proactively engage in future-proof planning to seek new opportunities and address rapidly evolving challenges. Within the global aluminium industry, the macroeconomic challenges led to reduced London Metal Exchange (“LME”) aluminium prices. However, we capitalised on the growth of green sectors such as electric vehicles (“EV”), solar and energy transmission – where aluminium plays a crucial role in key components and solutions – to open new avenues for growth. These emerging sectors represent promising opportunities for the Group and, with the trend towards low-carbon aluminium accelerating, we took steps to strengthen our sustainability profile, embracing the energy transition as a key driver of our future growth. FINANCIAL FORTITUDE IN CHALLENGING TIMES Our financial standing in FYE2023 remained robust with an annual revenue of RM13.8 billion and profit after tax and minority interest (“PATAMI”) of RM1.2 billion. This was mirrored by a strong balance sheet, with our net gearing ratio decreasing from 0.6 times in FYE2022 to 0.4 times as at the end of FYE2023. These results underscore our adept management of margins, our focus on value-added products (“VAPs”) – which deliver higher margins – and our prudent approach to balance sheet management. Our return on capital employed remains healthy at 22.2%. 1 Business Acumen 2 Global Outlook 3 Focused Teamwork 4 Quality Excellence 5 Social Responsibility
Messages from Our Leaders Messages from Our Leaders Press Metal Aluminium Holdings Berhad 14 15 Integrated Annual Report 2023 Chairman’s Statement Chairman’s Statement With our strong cash flow, a healthy debt-to-EBITDA ratio and strong liquidity, we have been able to effectively balance our transactional working capital and longer-term funding needs. This has resulted in a resilient financial framework for the Group, enabling us to allocate appropriate capital for investments in Environmental, Social and Governance (“ESG”) initiatives, new technologies and employee housing, amongst other areas. It also positions us well to seize potential expansion, acquisition and partnership opportunities. A YEAR OF ADDED VALUE AND SUSTAINABILITY PROGRESSION In FYE2023, we made commendable progress in strengthening our position across the aluminium value chain. In the upstream segment, our joint investments in Australia, Indonesia and China played a pivotal role in ensuring raw material security and streamlining our logistics costs, enabling us to improve our margins and drive enhanced financial synergies. Meanwhile, the establishment of a 30,000-tonne solar extrusion line at our Nilai plant in Malaysia opens the door for us to expand our production to include photovoltaic components and mounting extrusions, increasing our presence in the burgeoning solar energy sector. Within the context of sustainability, I am delighted to report that we maintained our status as a constituent of the FTSE4Good Bursa Malaysia Index with a four-star rating. Additionally, three (3) of our manufacturing plants – PMBtu, PMS and PMI – have obtained the Performance Standard certification from the ASI. These achievements are a testament to our unwavering commitment to sustainable aluminium manufacturing practices. Moreover, we have been recognised for the strong steps we are taking towards achieving carbon neutrality by 2050 and are making progress in reducing our Scope 3 greenhouse gas (“GHG”) emissions. This is happening in concert with close vendor and partner collaborations which aim to futureproof our decarbonisation actions and make them integral to our operations. In addition, we are amongst the leaders in implementing the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”), through which we are enhancing the clarity, quality and transparency of our climaterelated disclosures. These proactive measures are enabling us to stay ahead of the fast-evolving regulatory landscape on emissions and climate action, solidifying our leadership in sustainability within the Asian aluminium industry and positioning us competitively amongst our customers, suppliers and partners. In our social sustainability thrust, we remained committed to fostering healthy and liveable communities, delivering over RM6.3 million of in-kind contributions to local community programmes in FYE2023, with our employees completing approximately 7,700 volunteer hours in community engagements. These initiatives are elaborated on in detail in the Community Management topic within our Sustainability Report 2023. In addition, the Board has approved in principle a capital budget over three (3) years for the construction of a new township to house our employees working at Samalaju Industrial Park, Bintulu, and the development is currently in progress. The township will provide our employees with a range of commercial and recreational facilities, enhancing everyday convenience and improving their quality of life. It is another way that we are advancing our talent retention efforts. In governance, we continued to build the Board’s capacity to lead our holistic climate and ESG agenda while addressing the challenges involved in developing a viable and credible transition strategy – including issues surrounding appropriate disclosures, capital allocation and progress tracking. Given our expansion in recent years and the fast-evolving traderelated regulatory landscape, the Board is focused equally on improving our compliance oversight and enhancing our internal controls to drive operational efficiency, including by leveraging new technologies and artificial intelligence (“AI”) where feasible. On this note, our Management team is at the forefront of digitising and future-proofing our operations. In this vital area of competency, we strive to remain well ahead of the rapidly changing technology landscape, proactively identifying areas where technology adoption can advance our objectives as a business while upskilling our workforce to maximise our potential. ACKNOWLEDGEMENT Effectiveness and high performance stem from translating strategies into actionable outcomes. On this note, I would like to extend the Board’s sincere appreciation to our Senior Executive Management team for stepping up to assume joint responsibility for our success with unceasing diligence, commitment and focused teamwork. Their efforts, supported by the dedication of our people and talents across the Group, have been instrumental. I would also like to express my heartfelt gratitude to our shareholders, stakeholders, suppliers, partners, bankers and esteemed Board members for their unwavering support and confidence throughout the year. As we look ahead to 2024, we remain committed to further Fortifying Our Position by remaining transparent and responsible on our journey towards carbon neutrality, sustainable growth and value creation. DATUK YVONNE CHIA Independent Non-Executive Chairman April 2024 A CAUTIOUSLY OPTIMISTIC OUTLOOK FOR 2024 In 2024, the global green transition will call upon all industries to step up. We anticipate increased demand for low-carbon aluminium and see opportunities for growth in emerging sectors such as EVs and green energy infrastructure. Our own transition plans are robust and we remain flexible to adapt and adjust them if advancements in technology necessitate changes. However, the global aluminium outlook remains subdued, reflecting the subdued macroeconomic landscape and ongoing geopolitical uncertainties. Supply chain disruptions due to sanctions or bans in certain areas may also lead to short spikes in demand and prices. Nevertheless, armed with a robust financial structure, greater flexibility and a commitment to sustainable growth, pillared on our dedication to innovation, we are well positioned to navigate these cycles and stay on track to achieve our midto-long-term value creation goals. 7,700 volunteer hours by our employees in community engagements Approximately RM6.3 million in contributions to local community programmes Over
Messages from Our Leaders Messages from Our Leaders Press Metal Aluminium Holdings Berhad 16 17 Integrated Annual Report 2023 MANAGEMENT DISCUSSION AND ANALYSIS BY GROUP CEO POSITIONED FOR LONG-TERM GROWTH Tan Sri Dato’ Koon Poh Keong Group CEO “We are positioned strongly to capitalise on the industry’s changing dynamics and deliver long-term value and success for our business and our stakeholders.” Management Discussion and Analysis by Group CEO FOREWORD In 2023, the global macroeconomic landscape continued to be marked by challenges and uncertainties, ranging from ongoing trade tensions and geopolitical conflicts to persistently high inflation. Amidst this challenging environment, we have remained laser-focused on building our resilience and driving transformation for future success. We are growing our value-added products segment, which offers higher margins, while pursuing downstream growth opportunities in fast-growing green sectors like renewable energy and electric vehicles. We are also making commendable progress in securing our supply chain with the expansion of PT Bintan’s alumina refinery plant in Indonesia. As a result, we are confident that we will emerge from these economically uncertain times to a stronger, forwardlooking position. Armed with a truly sustainable business model, we are positioned to drive optimum long-term value for our business and our stakeholders. OVERVIEW OF PRESS METAL Established in 1986, Press Metal has grown from a privatelyowned aluminium extruder to become the largest integrated aluminium producer in Southeast Asia. Our midstream smelting plants, with a total capacity of 1.08 million tonnes per annum, are strategically located in Mukah and the Samalaju Industrial Park, Sarawak. Sarawak’s abundant rainfall and rivers ensure a consistent and sustainable hydropower supply, which is essential for our operations. Catering to a diverse clientele, including some of the world’s leading companies in transportation, construction, and consumer sectors, we offer a comprehensive range of products. This includes LME-certified high-grade aluminium ingot P1020, as well as value-added products such as billets, alloyed ingots (A356.2), and wire rods. Our downstream extrusion plants in West Malaysia and in Foshan, China, have a combined annual capacity of 230,000 tonnes per annum, enabling us to manufacture a variety of products tailored to specific usage across various industries. These include construction, automotive, consumer-related products, as well as electronics and electrical applications. To ensure a stable supply of key raw materials, we have strategically acquired and entered into collaborative agreements with companies in the upstream segment. These include equity interests in JAA and PT Bintan, respectively, enable us to secure a significant portion of our alumina requirement and reducing our reliance on third-party suppliers. 1.08 million MT SMELTING SEGMENT per annum 230k MT EXTRUSION SEGMENT per annum Additionally, our joint venture with Sunstone Development Co., Ltd has resulted in the development of a state-of-theart carbon anode plant, providing approximately 40% of our consumption requirements. MARKET UPDATES In spite of various external challenges faced in recent years, we have demonstrated financial and operational resilience by effectively managing a multitude of headwinds. The primary challenge to our business – and the aluminium industry as a whole – is the slower than expected recovery of the global economy. With inflation levels remaining high around the world and governments imposing monetary tightening policies in response, demand for aluminium in key sectors such as real estate, construction and manufacturing has moderated. Furthermore, trade and geopolitical conflicts have led to higher tariffs, trade restrictions and export quotas, with voluntary sanctions on Russian metal by some buyers have caused additional complexity to a challenging market landscape. Reflecting these challenges, 2023 was a year of consolidation and de-stocking for the industry. LME aluminium prices declined by an average of approximately 17% over the year while stocks have gradually depleted since August 2023, with headline inventory reducing to 443,000 tonnes in December 2023 – the lowest level since February 2023. The dwindling stocks signalled a tight supply of aluminium to the market despite weakened consumption due to the uncertain global economic outlook. Nevertheless, towards the end of December 2023, the official LME aluminium price surged, closing at USD2,335 per tonne, in response to the anticipated economic recovery and the expectation that the US Federal Reserve would commence interest rate cuts. Further room for optimism comes from the robust business investment climate in post-COVID China, where government policies are driving the nation’s transformation towards sustainable industries, including the solar and EV sectors. This development presents a promising growth opportunity for us as aluminium is used to form the frame of solar panels and as an input in various EV components like battery casings and car components, enabling lightweight design, improved corrosion resistance and greater durability. USD2,335 per tonne In December 2023, aluminium prices surged to
Messages from Our Leaders Messages from Our Leaders Press Metal Aluminium Holdings Berhad 18 19 Integrated Annual Report 2023 Management Discussion and Analysis by Group CEO Management Discussion and Analysis by Group CEO Lastly, amidst the major macro- and industry-level evolutions taking place, climate change remains a fundamental driver of change for manufacturers. Regulatory pressure has already come in the form of the European Union’s Carbon Border Adjustment Mechanism, which will effectively impose a carbon cost on imports of aluminium and other goods – when its transitional phase concludes at end-2025. Meanwhile, China’s Emissions Trading System is expected to be expanded to include industrial production, including that of aluminium, in the near future. This may benefit aluminium producers outside of China over the short-term by reducing market supply from China as national players adapt to the changes and will ultimately accelerate the industry’s move towards renewable energy and other sustainable production processes. Taken as a whole, these trends illustrate the dynamic nature of the industry, validating our proactive moves to fortify our business and wholeheartedly embrace sustainability across our operations and through the sectors and companies we serve. STRATEGIC FOCUS AREAS Cognisant of the potential impacts of the market dynamics, we have proactively identified strategic focus areas that will collectively enable us to remain on a sturdy growth path and further our reputation as a responsible, sustainable organisation. In our smelting segment, we have continued to invest in growing our capacity for VAPs. These products, which are detailed in the “Updates on Operational Activities” section, deliver higher margins compared to our primary aluminium products while also enabling us to diversify our business and minimise overall risk. In the downstream segment, our focus is on developing product-based extrusion solutions that address specific industry needs. This is illustrated by our extrusion plant in China, which has commenced the supply of aluminium car bumpers and battery casings to car manufacturers in the country. Meanwhile, we have also completed the construction of a 30,000 tonne photovoltaic components extrusion line at our Nilai plant, dedicated exclusively to manufacturing solar panel frames and mounting extrusions to support the solar power sector. These strategic moves into energy transition-related sectors mirror our Group-wide focus on sustainability, which has accelerated over the past years. All our smelters have obtained the ASI Performance Standard certification, showcasing our commitment to sustainable aluminium manufacturing practices and opening the door for us to supply to companies with more stringent standards around sustainable aluminium production. The benefits of our shift towards low-carbon products were evidenced in April 2023 when we secured a long-term export deal for aluminium ingots with Daching Enterprises Ltd (“Daching”), the world’s top three global aluminium foil manufacturers. The deal, which totalled RM110 million in revenue during FYE2023 and will generate a further RM670 million in revenue over the following five (5) years, was enabled in part by the low-carbon content of our ingots, which helped Daching meet its climate commitments. Meanwhile, we seek to expand our market reach, ensuring the resilience of our supply chain becomes more crucial than ever. To this end, we made progress by completing Phase 2 of our associate company, PT Bintan’s plant in Indonesia in 2023. This enables us with a consistent supply of alumina and meeting our smelting operations’ needs. It also unlocks cost savings due to its closer geographical proximity to our smelters, as opposed to relying on sources in other regions which entail higher logistics costs. UPDATES ON OPERATIONAL ACTIVITIES Despite the ongoing challenges affecting aluminium demand and prices, our smelting segment’s forward sales strategy enabled us to consistently deliver commendable profits and returns to our shareholders in 2023, while the decline in raw material and freight costs throughout the year also helped to alleviate overall cost pressures. With an eye towards future growth, we continue to explore opportunities in transport, transmission and other energy transition-related sectors that have shown great promise in replacing the weaker demand for aluminium within traditional sectors and applications. Within the extrusion segment, our focus on productbased extrusion has broadened, with our extrusion plant in China manufacturing aluminium battery casings and car components as well as our new photovoltaic components production line in Nilai currently undergoing testing with potential customers. To drive further growth in the sales of our extrusion products, we are actively on the lookout for opportunities in the renewable energy and EV markets, while seeking to establish opportunities with manufacturers relocating their operations to the ASEAN region. In addition, we continued to invest in the growth of our VAP segment by introducing new casting line for A356 ingots and wire rods. As a result, the segment has increased its share of our total sales volume to 41%, compared to the previous year’s 36%. Across both segments of our business, we took significant strides in enhancing internal operational efficiencies, with a key strategy here being the implementation of resource optimisation initiatives to improve our smelting efficiency. By improving our operational footprint in this way, we are unlocking lower operating costs while driving emissions reductions, thus meeting our business and sustainability goals holistically. REVIEW OF FINANCIAL PERFORMANCE Financial Year Ended 31 December (RM’million) 2023 2022 2021 2020 2019 Revenue 13,805 15,683 10,995 7,476 8,805 EBITDA 2,551 2,768 2,045 1,239 1,229 Profit before tax 1,646 1,952 1,443 655 631 Profit after tax 1,518 1,767 1,295 587 582 Profit attributable to shareholders 1,215 1,407 1,002 460 474 Total assets 15,366 15,316 14,211 11,934 9,661 Shareholders’ funds 6,933 6,637 3,873 3,995 3,666 Total equity 8,396 8,005 4,920 4,890 4,480 Borrowings 4,628 5,093 6,370 5,148 3,861 Net Debt/ Equity Times 0.40 0.56 1.20 0.91 0.78 Net earnings per share* Sen 14.75 17.16 12.41 5.69 5.90 Dividend per share* Sen 7.0 6.0 3.4 2.1 2.6 * Adjusted retrospectively to reflect the 1 for 1 bonus issue exercise completed in April 2021 Revenue We achieved revenue of RM13.8 billion in FYE2023, representing a 12% decrease compared to FYE2022, mainly due to softened aluminium prices during the year. As our smelting segment is the main driver of our revenue and profitability, LME aluminium prices play a vital role in determining our financial performance. Costs Alumina, pre-baked carbon anodes and electricity make up the primary manufacturing costs of our smelting operations. At the start of 2023, alumina market prices surged to an annual peak of USD371 per tonne, an uptick from USD330 per tonne at the end of 2022 which is mainly attributed to supply disruptions in Australia and heightened stockpiling activities. From April 2023 onwards, alumina prices began to normalise, fluctuating within the range of USD325 - USD362 per tonne, due to softer demand stemming from lower aluminium prices. The average market price of alumina for the year was USD343 per tonne – approximately 15.0% of the average aluminium price in 2023. The average price for pre-baked carbon anode moderated substantially during 2023, starting at above RMB7,000 in January 2023 and declined by more than 30% to below RMB5,000 by the end of the year. The price adjustment was mainly due to the easing of raw material prices. The average market price for the entire year was at least 20% lower compared to the average price in 2022. In terms of electricity, we benefit from the location of our smelting plants within the Sarawak Corridor of Renewable Energy. This enables us to receive a stable electricity supply generated predominantly from hydropower, secured by long-term power purchase agreements with the Sarawak state’s power company. Therefore, unlike smelters operating under a floating rate of power purchase agreement involving coal-fired or gas-fired power plants, our financial performance is not influenced by coal and gas price fluctuations. Profitability Tracing our moderated revenue, our profit before tax declined by 15.7% to RM1.6 billion in FYE2023 while our PATAMI for FYE2023 was RM1.2 billion. Dividends A total dividend of RM576.8 million, or approximately 47% of PATAMI, was declared in respect of FYE2023. Moving forward, we will continue to reward shareholders for their steadfast support subject to fulfilling our profitability, capital expenditure and overall liquidity requirements.
Messages from Our Leaders Messages from Our Leaders Press Metal Aluminium Holdings Berhad 20 21 Integrated Annual Report 2023 Management Discussion and Analysis by Group CEO Management Discussion and Analysis by Group CEO Borrowings and Gearing Our total borrowings decreased by 10%, from RM5.1 billion in FYE2022 to RM4.6 billion in FYE2023. The decrease in borrowings was due to higher repayment of borrowings on the back of strong cash flow generated from our operations. As a consequence, our net gearing ratio has decreased significantly, from 0.6 times in FYE2022 to 0.4 times in FYE2023. RISK FACTORS AND RISK MANAGEMENT The performance of our business is impacted by several key market risks, including adverse changes in aluminium prices, premiums and upcharges for our VAPs. In response, we hedge a portion of our aluminium production volume for up to three (3) years, thus securing an acceptable price and minimising the impact of any industry downturns which may occur. We also undertake foreign currency hedging to reduce our exposure to fluctuations in the USD-RM exchange rate. Within the macroeconomic environment, geopolitical uncertainties and trade disputes remain prominent risks affecting global demand and commodity prices. In addition, the spectre of rising interest rates, cost inflation and the possibility of a slowing economy could potentially dampen future consumption. By expanding our profit margins through our VAPs and steering towards opportunities arising from new market dynamics, we can reduce the impact of such macroeconomic trends on our business. Lastly, sustainability-related risks are a key concern and area of focus for our business. Cognisant of the negative impact that any instance of non-compliance with environmental or social regulations can have – financially, legally and reputationally – we have integrated sustainability as a core consideration within our strategic and operational decision-making processes. TAN SRI DATO’ KOON POH KEONG Group CEO April 2024 APPRECIATION As we navigate through these unprecedented times, our resilience is thanks in no small part to the unwavering faith and support shown by our stakeholders. First and foremost, I would like to thank our Board of Directors for their wisdom, guiding us towards the best path forward during good and trying times alike. Similarly, our employees have not only displayed admirable loyalty but brought their skills and knowledge to the fore when they were needed the most. Your contributions are crucial to our shared success. I would also like to pay a special tribute to our customers, some of whom have been with us since our earliest days. Your ongoing trust and spirit of partnership are essential ingredients of our success, making us who we are today. Lastly, to our shareholders, I offer my heartiest thanks for the confidence you continue to show in us. We value your support and will continue to strive towards our goals to create sustainable value and returns for you. As we look forward to 2024 and the many possibilities that lie before us, I hope that you will share our view that our best days still lie ahead. With that, I look forward to making these avenues for advancement a reality and sharing them with you. RM1.2 billion PATAMI in FYE2023 Total dividends paid as a percentage of PATAMI 47% ESG PRIORITIES As regulatory standards and customer expectations around sustainability grow more stringent, the progress we are making across the ESG spectrum stands us in a good stead to deliver shared and lasting value for our stakeholders and our business. As outlined earlier in this statement, we have adopted a forward-thinking approach to sustainability by introducing circular economy practices, enhancing our resource efficiency and pursuing the use of renewable energy in our operations. Our sustainability performance continues to be validated by reputable local and international ratings and accreditation organisations. In October 2023, our MSCI ESG Rating was upgraded from “BBB” to “A”, certifying that we remain highly resilient against long-term, ESG-related risks. Meanwhile, our management quality score under the Transition Pathway Initiative has been graded up from Level 3 (Integrated into Operational Decision-Making) to Level 4 (Strategic Assessment), indicating a high level of readiness to undertake a low-carbon transition. These concerted efforts and consistent achievements have resulted in us maintaining our 4-star rating under the FTSE4Good Bursa Malaysia Index for the second year running. Detailed information on our sustainability approach and achievements can be found in our Sustainability Report 2023, from pages 94 to 97. TRENDS AND OUTLOOK We are adopting a cautiously optimistic outlook, conscious of the potential for a prolonged economic downturn and also the various growth opportunities that have emerged. In the short-term, we foresee a consolidation of the aluminium market at present levels, indicating that the worst may be over for the market. We also anticipate that the demand for aluminium will improve as interest rates potentially embark on a reversal course and global economies continue to recover. While the demand for aluminium awaits a rebound in the economy, its supply, previously curtailed, is expected to make an equally slow return to normal levels due to the scarcity of renewable energy for low-carbon production. Consequently, there is a possibility of a gradual improvement in aluminium prices, aligning with the potential recovery of the global economy. Looking further ahead, we are confident in the prospects of the aluminium industry. With increased capital investments in green sectors and a shift towards low-carbon content aluminium, sustainable industry players stand to benefit from an increase in demand, cushioning the reduced demand from traditional industries. Additionally, the supply chain outside of China may experience higher demand for aluminium as manufacturing operations relocate to ASEAN, thus providing new opportunities for local players to capitalise on. Through our investments in sustainable production processes and our continued pursuit of growth in the renewable energy, EV and other emerging sectors, we are positioned strongly to capitalise on the industry’s changing dynamics and to deliver longterm value and success for our business and our stakeholders.
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